By Ehssan Veiszadeh, Chief Executive Officer, Roads Australia

How can industry and government come together to make Australia’s infrastructure delivery more efficient and effective?

Australia’s decades-long challenge with infrastructure productivity is the sleeper issue that we cannot afford to ignore.

Infrastructure investment underpins our economic growth and quality of life, however, productivity in the sector has not improved in 30 years.

Overall, Australia currently ranks 16th in the Organisation for Economic Co-operation and Development (OECD) for productivity – our lowest in 60 years. We also recently slipped from 14th to 16th in the World Digital Competitiveness Ranking.

While slowing, Australia’s infrastructure pipeline is valued at $230 billion over five years and will grow as housing, energy and defence investment increases.

The task for industry is significant, however inefficiencies in procurement and delivery persist while adoption of productivity-enhancing measures such as digital twins, artificial intelligence, machine learning and robotics, remains low.

This is driving up construction costs and impacting delivery of the infrastructure pipeline and the sustainability of our industry.

At risk is Australia’s global competitiveness and our ability to efficiently deliver infrastructure that meets the needs of our growing communities.

Industry leaders have long called for a nationally coordinated effort to improve construction productivity and innovation.

Others have rightly argued that government can’t effectively pull policy levers until there is a nationally consistent set of measures in place.

The case for change is strong but as an industry we have yet to move the dial on reforms to make Australia’s infrastructure delivery more efficient and effective.

Now that we are facing a significant shift in market conditions, can industry and government come together to fundamentally shift productivity in the infrastructure sector?

Removing barriers

Declining public infrastructure funding, cost escalation and an increasingly difficult industrial landscape are fundamental challenges facing the Australian infrastructure sector.

Added to that is the imperative to decarbonise, manage restrictive local content quotas and meet a complex set of standards that vary from one jurisdiction to another.

It is an undeniably challenging time to do business in Australia.

This is the clear message we hear from Roads Australia’s member organisations, including transport agencies, major contractors and consultants, road owners and operators, material suppliers and technology providers.

In a financially constrained and uncertain environment, risk allocation remains a concern for industry.

Acknowledging the shared ambition for better project outcomes across the public and private sectors, there is a need for commercial approaches that are more reflective of current market conditions.

Improving public sector procurement capability also requires ongoing focus, as do improvements to bidding processes that are still characterised by unreliable timeframes and inconsistent approaches to bid cost reimbursement.

The opportunity cost for assembled project teams awaiting tender outcomes undermines the sustainability of the industry.

There is also a need to continually pursue more collaborative contracting approaches with appropriate risk allocation and mitigation between clients, contractors and subcontractors.

Project packaging, which engages all tiers of the industry, offers substantial productivity benefits and should be adopted as much as possible.

The approach taken in the Level Crossing Removal Project in Victoria is a good example, and one that has fostered a highly collaborative and innovative culture.

Improving long-term certainty

Last year’s necessary reprofiling of the federal infrastructure pipeline delivered hard lessons for the sector and highlighted the importance of longer-term planning.

Putting politics aside, public infrastructure is a critical catalyst for economic growth and development.

According to Infrastructure Australia, every dollar of public infrastructure investment can generate GDP increases of up to $4 over the life of an asset.

The Australian transport sector in particular is critical to our country’s success, and because it determines the physical accessibility of education, services, employment and opportunities in general, it is intrinsically linked to fairness and equity in our society as well.

With a need for ongoing investment in our transport networks, Roads Australia strongly supports a transparent and well-managed pipeline and greater rigour around investment decisions.

However, without funding commitments beyond the forward estimates, industry cannot effectively manage future workforce skills and capacity.

In the face of a huge build out in energy, defence and housing, the transport sector risks permanently losing the highly skilled and experienced talent to deliver the infrastructure and innovation our nation needs.

Already, we have seen an increasing number of redundancies in the sector.

With more certainty, industry will have confidence to build and invest in capacity and capability for the project pipeline, have greater certainty on timing, costs, and risks; and be energised to bring innovation and efficiency in project planning and delivery.

Supporting innovation

According to Infrastructure Australia, construction is one of the nation’s least innovative sectors, often lagging other economies in the uptake of modern methods of construction.

Its most recent Infrastructure Market Capacity report notes that prefabricated construction constitutes three to five per cent of Australia’s construction industry, compared to 80 per cent in Sweden, 20 per cent in the Netherlands, 12 to 16 per cent in Japan, and nine per cent in Germany.

A 2023 KPMG survey of construction in Australia shows that more than 50 per cent of respondents are yet to adopt technologies like digital twins, artificial intelligence, machine learning and robotics, which are critical to enhancing productivity.

The onus is on industry to bring innovation to market; however, we can’t do it alone.

Our members regularly share their frustration that some government clients continue to put up barriers, rather than support, innovation.

Difficulties in adopting innovation at the project level, including the use of new methods and recycled materials within the existing contracting approach, persist.

There are worrying examples across the transport sector of firms that have invested substantively in innovative technologies and materials that are consistent with government policy at a strategic level, only to face barriers when it comes to implementation.

In addition, as the Productivity Commission has observed, AI could accelerate innovation and future productivity growth by increasing workforce productivity, however regulatory certainty is still some years away.

Transport for NSW recently launched the Gateway to Innovate initiative to create an opportunity for industry to test innovations on some of Australia’s most complex and high-profile projects.   

Recognising the need to uplift sector productivity, Gateway to Innovate enables delivery solutions to be pitched outside of the standard procurement process to speed up implementation.

Roads Australia supports this initiative, but more broadly we wish to see supportive regulatory frameworks as well a commitment at the program and project level to support innovation.

We would also challenge all parties to engage with new ideas through the lens of potential productivity improvements, which frequently also contribute to better outcomes in terms of sustainability and safety.

Meaningful collaboration

As an organisation tasked with creating a place for the public and private sectors to work together towards a better transport system for more than 70 years, Roads Australia has seen the benefits of meaningful collaboration.

Increasingly, on the matter of productivity, it is clear to us that the old silos of public and private are not conducive to sustainable, thriving infrastructure sector.

Industry wants to partner with government to support the productivity growth our nation needs and there is an equal ambition from government to collaborate more with industry.

There is new momentum around meaningful collaboration that we must seize on to deliver lasting productivity benefits.  We must build on what has been achieved in the past with fresh thinking, different perspectives and a willingness to eliminate hurdles and adopt innovations.

Supporting this task is a national policy priority for Roads Australia, as we seek to facilitate and curate important conversations, create opportunities for engagement and support a high-performing transport sector.

Importantly, we shouldn’t wait for an economic crisis to befall our industry and the nation more broadly to act.

We should all take the productivity challenge seriously and consider the role we play in the system to support an efficient and innovative sector, and how we can move past some of these challenges together.